High Drama in Simon Property Group Hostile Takeover Attempt of Macerich Company

The past few weeks have seen dramatic developments in commercial real estate, as Simon Property Group, the largest mall owner in the U.S., has attempts to buy The Macerich Company, the third-largest owner, in a hostile takeover. Macerich’s portfolio also includes Santa Monica Place and Westside Pavillion.

Between the time that Simon announced its initial offer, and the time Macerich rejected the final offer, bids crept from $91 per share to $95.50 per share, and the total price tag increased from $16.8 billion to $23.2 billion.

Macerich rejected the offers on the grounds that it was being undervalued. In addition to doing so, Macerich approved a “poison pill” provision allowing shareholders to “buy shares at a discount, diluting an acquirer’s stake. The company also staggered its board of directors so that only a minority of seats can open up each year. Such moves are designed to thwart takeover attempts.” (WSJ)

Activist investor Orange Capital LLC, a New York-based hedge fund with about $1.3 billion under management, has joined the fight, hoping to pressure Macerich to reconsider engaging with Simon. Orange Capital then “teamed up with Land and Buildings Fund LLC, an activist fund led by Jonathan Litt, and first nominated directors to Macerich’s board” (WSJ), and then became involved in a series of suits and countersuits with Macerich disputing Litt’s eligibility to nominate board members. Both suits are pending in Maryland state court.